On Friday, FHFA issued a final rule required in the 2008 HERA GSE-reform law, which mandated new prudential standards for Fannie Mae, Freddie Mac and the FHLBs. As permitted by law, the rule implements these safety-and-soundness standards through guidance, not a binding rule. As a result, the GSEs have more flexibility implementing them and FHFA can stay its hand in the event of violations. But, even so, the new standards rewrite the corporate-governance and risk-management rulebook for Fannie, Freddie and – most important in our view – the FHLBs.

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